American Express stock has more downsides, analyst says. Blame student loans.

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American Express stock was downgraded on Monday as a Piper Sandler analyst raised concerns about how resuming student loan payments could negatively affect the card issuer.

Analyst Kevin Barker downgraded shares of American Express (ticker: AXP) to Underweight from Neutral and cut its price target to $149 from $172. The analyst said that with student debt repayments resuming this fall, he expects to see a slowdown in spending as young people budget for their next monthly loan repayments.

Millennials…

American Express stock was downgraded on Monday as a Piper Sandler analyst raised concerns about how resuming student loan payments could negatively affect the card issuer.

Analyst Kevin Barker downgraded shares of American Express (ticker: AXP) from neutral to underweight and reduced its price target to $149 from $172. The analyst said that with student debt repayments resuming this fall, he expects to see a slowdown in spending as young people budget for their next monthly loan repayments.

Millennials grew to 30% of AXP’s customer base from 19% in 2019 as the company focused on investing in a customer with the greatest growth potential. This strategy makes sense to us, but this generation’s outsized spending on stimulus dollars and government grants makes this age group most at risk of spending cuts, Barker wrote in a research note Monday.

The Supreme Court has ended the Biden administrations’ plan to forgive some student debt at the end of June. The Bidens plan would have canceled nearly $430 billion in student loans. Now, about 43 million borrowers with $1.7 trillion in student debt are expected to start repaying in October.

We expect AXP to experience headwinds on revenue growth and operating margins, which will impact 2024 results, Barker said.

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American Express did not immediately respond to a request for comment from Barrons. However, during the company’s second quarter earnings call on Friday, American Express said Millennials and Gen Z consumers continue to be the fastest growing portion of our cardholder base with U.S. billings up 21% in the quarter.

The company also increased its total provisions for credit losses to $1.2 billion, a jump from $410 million in the same period last year.

Shares of American Express were down 1.2% on Monday at $1,468.24. The stock is up 14% this year. The S&P 500 was up 0.5% at noon.

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Write to Angela Palumbo at [email protected]

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